Study Session 9: Equity Valuation: Valuation Concepts
I’m doing a DCF calculation but how can I forecast financial derivatives?
It currently has a fair value of -100. And -50 of this fair value expires next year, and -50 expires the year thereafter.
How can I forecast this, can I just discount the -50 cash outflows?
I saw a question somewhere once where it required me to de-lever a company beta and lever it back up to using a given Debt/Enterprise Ratio(instead of Debt/Equity ratio). Could somebody please explain how this is done. I can’t find anywhere in the equity book how to do this?
Heyaz.. I have just recieved my Curriculum and just started reading by equity section. I came across a term named as Coglomerate Discount which means that the company who is in more unrelated business, market tends to apply discount on that stock of the company in comparison to the stock of the company with narrow focus.
Some explanations were given like:
1. Inefficiencies in Internal Capital Market
2. Endegenous Factors
3. Research Measurement Errors
I failed in Band 10. I am bit surprised with my Equity score which is <50%.
I want to know if retabulation of the scores manually would increase my chance of passing.
This is my scorecard. Could someone tell me if it is worth going for retabulation with my scores.
a theoretical question: in the fama-french three factor model, we get required rate of return on equity from the following equation:
R= Risk-free rate + b1 * market risk premium + b2 * small-cap return premium + b3 * value return premium. Here, b stands for factor beta.
I bring this question up in response to CFAI 2011 PM Mock #57. In the book, they talked about justified P/E alot and importantly, always specified trailing or leading P/E. In this question they ask for the intrinsic P/E and do not specify. In the explanation they use the same equation as for justified forward P/E. (1-b)/(r-g)
Does anyone know what the distinction is between justified and intrinsic or if we should assume forward P/E when it’s not specified?
Use DDM- Minority perspective
FCFF- cap structure instable, control perspective
According to Google “define ROE”:
“The mass of eggs contained in the ovaries of a female fish or shellfish, typically including the ovaries themselves…”
So my question is… which one of these is the correct definition?
A. ROE(2011) = Net Income(2011) / Book Value(2011)
B. ROE(2011) = Net Income(2011) / Book Value(2010)
C. Other: __________
Profitable company with earnings growing at 5% annually, pays a good dividend of $1.25 every year. Would you use DDM to value the stock or not? Why?
Nominal required rate of return 14%
Real required rate of return 8%
Present value of nominal cash flows discounted at 14%: Rs. 16.75 billion
Present value of real cash flows discounted at 14%: Rs. 12.25 billion
Present value of nominal cash flows discounted at 8%: Rs. 23.78 billion
The present value of the real cash flows discounted at 8% is closest to:
A. Rs. 14.06 billion.
B. Rs. 16.75 billion.
C. Rs. 23.78 billion
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